Guest Post – 2 Energy Tax Credits Expiring This Year

Over the last few years, many tax credits have been offered by the Federal Government and many States (usually rebates) that serve to help improve the environment by giving incentives to consumers to be energy efficient. Many of the environmental tax credits extended with the American Recovery and Investment Act began in the 2005 Energy Policy Act and other legislation. Some “green” tax credits will expire at the end of this year, while others will be available until 2016. Tax credits are better than deductions because they act as a dollar-for-dollar credit against your tax liabilities. Be sure to check with your State for other rebates and/or tax credits.

1. Home Energy Tax Credit Expiring This Year

If you own a home there are few energy efficient projects that will not only cost you a lot less to complete, but will actually save you potentially thousands of dollars in the long-run with no income restriction (new construction does not qualify). The tax credit for projects below is 30% of the cost or $1500 (whichever is less). In some cases, the labor/installation is covered. Realize, that the tax credit can be used on multiple products, but the total combined tax credit cannot be more than $1,500 over a 2 year period.

Project 1: Install Energy Efficient Windows, Skylights, or Doors
Restrictions: Does not apply to installation/labor, must be your primary residence, and installation must occur in 2010. Lastly, the U-Factor (rate of heat transfer) and the Solar Heat Gain Coefficient (SHGC) must be .30 or lower.
Notes: Fill out IRS Form 5695 for 2010 and submit it with your 2010 tax return. This could end up saving you in the long-run with lower heating bills, and it provides for a cleaner environment. Storm windows can be installed over old windows to reduce air flowing into and out of older single-glazed windows. If you go this route, interior storm windows are recommended as they are easier to maintain and install.

Project 2: Get a Biomass stove installed that burns organic material, such as wood pellets, corn, or wood
Restrictions: Needs to be at primary residence, and it must have a thermal efficiency rating of at least 75%. Your manufacturer should provide a Certification Statement that it meets the tax credit qualifications.
Notes: According to a USDA report by the Forest Products Laboratory, seasoned firewood seems to cost the least in heating a home, with natural gas and wood pellets following respectively. You should consider the handling and processing of each fuel type and its efficiency. Fill out IRS Form 5695 and submit it with your 2010 tax return to claim the credit. The tax credit would apply to the installation cost.

Project 3: Install Insulation in exterior walls, basements, ceilings, foundations, crawl spaces, the attic, or any place that lowers heat loss/gain (see examples).
Restrictions: Must be installed in 2010, does not include labor/installation, must be primary residence, and ensure you have a Manufacturer’s Certification statement.
Notes: Fill out IRS Form 5695 and submit it with your 2010 tax return. You can check the recommended insulation levels for your area of the country here. Insulation and products that seal are included. This should save you money on heating and/or cooling costs over the long run.

Project 4: Put on a metal or asphalt roof (“reflective roofs”) that decreases heat gain
Restrictions: Everything above with no roof coatings allowed.
Notes: Fill out IRS Form 5695 and submit it with your 2010 tax return. Understand, that if your house currently has shading (from trees etc), then a new roof may not provide significant efficiency gains.

Project 5: Install a commercial storage tank, tankless, or commercial gas condensing water heater powered by gas, oil, or propane. Electric heat pump water heaters qualify as well (not electric storage or tankless).
Restrictions: Must meet specifications listed in project 3. Gas, Oil, and Propane Water Heaters must have an energy factor at least of 82, or a 90% thermal efficiency with electric heat pumps needing an energy factor of at least 2.
Notes: Complete IRS Form 5695 and submit it with your 2010 tax return. The tax credit would apply to the installation and labor here. Just like any other projects, a new efficient water hear or heat pump will help reduce heating or energy bills.

Project 6: Install Air Source Heat Pumps, Central Air Conditioning (CAC), Gas/Propane/Oil Hot Water Boiler, or a Natural Gas/Propane/Oil Furnace.
Restrictions: Must be an existing home, your principal residence, and there are different requirements that need to be met so be sure to obtain obtain a Manufacturer Certification Statement for whatever product you buy. If you install a CAC, be sure to replace your heating and cooling systems.
Notes: Again, fill out IRS FORM 5695, and submit that with your 2010 tax return.

2. Gas-Electric Hybrid and Alternative Fuel Vehicles Tax Credit Expiring This Year

Were you looking at purchasing a new car? This tax credit is available to individuals who lease or purchase a new hybrid electric-gas motor vehicle placed into service before the end of the year. The credits vary by the year, make and model, but normally you can claim the full credit up to one quarter after the quarter the manufacturer sells the 60,000 vehicle. The following quarter, the tax credit is 50%, the next two quarters respectively it is 25%, until the fifth quarter when the credit is finally phased out. Check the IRS website for credits and qualifying vehicles. However, Ford, Honda, and Toyota vehicles no longer qualify, but manufacturers such as BMW, Nissan, Mercedes Benz and others still qualify (check with the manufacturer or IRS.gov). Hybrid and alternative fuel vehicles are not only good for the environment, but they can also significantly reduce your energy costs. Be sure to fill out Form 8910 for 2010.

These two tax credits listed above are only those ecologically friendly tax credits which are expiring this year, as many others that involve Plug-In Electric Vehicles, Plug-In Hybrid Conversion Kits, or home efficiency products related to solar energy systems, geothermal heat pumps, wind turbines, and fuel cells will expire in 2016. Taking advantage of these tax credits will not only lower your energy bills, but also pollution and greenhouse gases.

The former is a guest post by Matt Robinson, an accountant and blogger for TaxDebtHelp.com, a company that assists taxpayers with tax debt and other major IRS problems.